I am Hollywood

[Chapter 1024: The Unprecedented Surge]

Many years later, when recalling the summer box office of 1998, movies like Charlie's Angels, The Matrix 2, and The Day After Tomorrow surely came to mind. However, for most people, the first thought that popped into their heads was likely that terrifying scene where the vengeful spirit crawled out of the television.

The opening weekend box office for The Ring was not particularly impressive, raking in only $26.68 million. However, as word of mouth about this classic horror film spread rapidly, the total box office for its first seven days soared to $43.88 million.

On the surface, $43.88 million seemed modest compared to other summer blockbusters. But it was important to remember that the film's production budget was only $30 million, far lower than any of the summer hits.

Moreover, comparing the first three days to the first four weekdays, it became apparent that The Ring earned $17.2 million during those weekdays, which equated to 39% of its opening week take. This was significantly higher than the average 30% for most films during weekdays. Considering this along with the heavy media and fan engagement, New Line Cinema astutely recognized that The Ring's momentum was gathering strength, prompting them to increase the number of screens from 2,161 to 2,395.

In the first week of August, The Ring's box office drop was predictably minimal, just a slight 9.7%, bringing in $39.65 million. The X-Files, which premiered the same week, managed to surpass The Ring's earnings by less than $2 million, barely clinching the number one spot that week.

Under these circumstances, New Line once again ramped up The Ring's exhibition scale, boosting the North American screen count to 2,775. After two weeks of building anticipation, the film's reputation peaked. Among young audiences, there emerged a trend of viewing The Ring as a challenge. This led more casual moviegoers, influenced by the surrounding buzz, to flock to theaters.

By the third week, after being outperformed by The Scorpion King and The X-Files for two weeks, The Ring finally secured the top box office position, with a week-over-week drop of only 11.2%, earning $35.19 million.

...

Suddenly, many people realized that what had initially seemed like an unassuming mid-budget horror flick had accumulated a total box office of $118.75 million in just three weeks. This far surpassed the North American totals of earlier summer blockbusters like Lethal Weapon 4, The Patriot, and The Truman Show. Given the current momentum, the box office potential for The Ring looked to be far from exhausted.

With Firefly Group's support, The Ring's growing fanbase became increasingly invested in its box office performance. The swell of interest coupled with a new wave of promotions attracted even more fresh viewers.

Consequently, in the fourth week, The Ring's drop in box office earnings was virtually negligible at just 1.7%. That's right, just 1.7%, not 17%. The film's weekly earnings reached $34.59 million, pushing its North American total to $146.97 million. This figure rocketed The Ring to sixth place on the 1998 North American box office charts as of August, following hot on the heels of Charlie's Angels 3, The Day After Tomorrow, The Matrix 2, The Scorpion King, and the Easter release of Austin Powers: The Spy Who Shagged Me. Furthermore, every other film in the top ten had production costs at least double that of The Ring.

At this point, all the media that had predicted Firefly Group would experience a quiet summer were left utterly stunned. Even Eric never anticipated that The Ring would unleash such formidable box office potential.

Given its current trajectory, The Ring was likely on track for at least another $100 million in box office earnings. Its North American total could very well exceed that of Firefly's summer feature, The Day After Tomorrow. Given such impressive North American numbers, the film's international box office wouldn't fall short, especially in Japan. This single overseas market alone could yield Firefly another $100 million in international revenue.

Who would dare claim that Firefly Group's film business was at a low point while two films were on track to join the year's top five box office earners?

...

Meanwhile, nearly in tandem with The Ring's release, an economic crisis erupted in Russia.

Unlike the lengthy tug-of-war in Southeast Asia, the fragile Russian economy faced a brutal assault from hedge funds with little chance of counterattack. The country's foreign exchange reserves of over $100 billion were insufficient even to cover its massive debts, let alone effectively intervene in currency exchange rates.

In just two weeks, the Russian central bank, without putting up any significant resistance, brazenly announced it would entirely abandon defending the ruble's exchange rate. The ruble, which had stabilized for less than three years, swiftly plummeted, experiencing devaluation of over 50% in just a week.

Yet an attacker that fails to strike first often ends up suffering devastating losses. The policy of allowing the ruble to freely devalue resulted in massive financial hits for international currency speculators. Currency futures were a zero-sum game, where profit for one party could only come at the expense of another. With Russia no longer in the game, speculators saw the ruble's sharp devaluation coupled with exorbitant short-term lending costs, leading to huge financial losses.

Moreover, capital investors like Soros' Quantum Fund, which had previously shown confidence in Russia's economic recovery by investing heavily in its stock and bond markets, found themselves trapped in an economic quagmire. After making a difficult exit, Quantum Fund expected losses exceeding $3 billion.

The swift unraveling of this emerging economy validated Morgan Stanley's forecast given over a month prior. Under further encouragement and guidance from Morgan Stanley, increasing capital flows sought out the tech stocks within the Nasdaq.

In a month, the Nasdaq index not only remained resilient in the face of Russia's crisis but also soared past the 2,100-point mark with virtually all major tech stocks in the green.

...

On Saturday, August 22, Eric set off early from Los Angeles, flying to New York.

It was the day Firefly Investments would finalize stock transfer agreements with several major investors from America Online. While Saturday was not a working day, Gravity was in the middle of a tense production schedule, leaving Eric with only the weekend for meetings. New York had to accommodate his schedule.

Over the past month, America Online's stock price had skyrocketed without the pressure of Firefly Investment's divestment, with the company's market cap reaching $49.6 billion -- $50 billion was just around the corner.

Although America Online's stock had increased nearly 20% in a month, Eric decided against adjusting the already agreed-upon transfer price to avoid stirring any further waves.

Many times, abandoning greed can lead to greater gains. If Eric were to raise the price now, the investors' newly established faith in America Online would likely take a hit, and Firefly Investment's divestment plan for America Online would encounter unforeseen complications.

Since Eric had fixed the same pricing for an upcoming 15% stock divestment to be managed by Morgan Stanley, there was already considerable interest from numerous investors attempting to secure more shares even before Morgan Stanley's underwriting plan commenced.

Although this batch of stocks was subject to a six-month lock-up period due to SEC regulations, investors were assured that even if America Online's stock price remained unchanged for that duration, they would still see a 20% profit upon the lapse of the lock-up.

In a thriving Nasdaq market, America Online's impressive growth rate further prompted many investment firms to shift from their cautious approach, assessing the likelihood of loss in this transaction as negligible.

...

On the flight to New York, Eric relaxed on a sofa, holding a box office analysis report for The Ring while Caroline and Mayer sat beside him, reporting on another matter.

"Last month, Warner Records, Sony Records, BMG, and EMI Records all released their second-quarter earnings reports, showing declines compared to the previous year of 27%, 33%, 29%, and 26%, respectively. Universal Music, which is still merging with PolyGram, experienced an even steeper decline of 36%, with losses of $320 million in just one quarter."

Mayer briefly outlined the situation and then continued after gauging Eric's reaction, stating, "According to data compiled by various record labels and media recently, the dramatic revenue drop from the Big Five record companies has largely been attributed to the rise of free MP3 music sharing websites that emerged late last year. One site, called Napster, amassed over 7 million registered users in just over six months, offering a staggering 1.6 million songs for free. Initially, Napster was part of Yahoo's advertising alliance, but in March, due to the rising legal risks, Yahoo promptly terminated its partnership with Napster and other similar piracy sites. However, in this round of lawsuits, the Big Five record companies included Yahoo as a defendant, claiming that Yahoo facilitated Napster's growth and spread, thus suing Yahoo for $100 million and demanding that it proactively block links to sites that propagated pirated music."

With Yahoo's IPO approaching, the Big Five's lawsuit against Yahoo was clearly a strategy to ensure they cooperated in combating online music piracy.

At such a critical juncture, Yahoo had no choice but to negotiate quickly with the Big Five to avoid further complications. Just as the Big Five proposed a $100,000 settlement for each pirated song with Napster, they would surely be aiming for an easier agreement with Yahoo.

"They've finally wisened up this time, attacking the enemy by rescuing themselves," Eric smiled slightly. Months ago, while in Britain, he had instructed several companies to prepare for this eventuality, and he wasn't worried about Yahoo handling it poorly. He then inquired, "What about Firefly Electronics?"

Mayer shook his head, "The Big Five haven't taken any action against Firefly Electronics yet. However, they are likely to demand restrictions on audio copying."

After the lawsuit filed by Sony and a few others was outright dismissed by the San Francisco federal court last year, the Big Five seemed to understand that pursuing a ban on MP3 players was unlikely to succeed and would have to find a different approach.

"After this, the record companies should finally see some realities. The trend of digital music is inevitable, and Yahoo Music Store should leverage this opportunity to secure more licensed music," Eric remarked, not wanting to overthink it. He then looked at Caroline and Mayer and instructed, "Send an email, reminding Yahoo to pay attention to public sentiment on this issue. If anyone is still oblivious, we'll help them see the light."

For months now, the global monthly sales of the Fireflyer player had surpassed 2 million units and continued to grow steadily. The trend of portable digital music players replacing traditional ones was unstoppable. In this environment, if record companies remained resistant and opposed to digital music players, they would only exacerbate the proliferation of pirated music resources online.

...

While discussing these matters, they didn't realize their private jet had already reached the East Coast.

The stock transfer signing ceremony was scheduled for 2 PM Eastern Time, and it was almost 1 PM. Instead of landing at MacArthur Airport in central Long Island, this time the private jet touched down at JFK Airport, which was very close to New York City.

As Eric disembarked, he was greeted by Chris, John Mack, and several other America Online executives, including Steve Case. Although the two parties had been on bad terms recently, they could not neglect the essential courtesies due to Eric's presence.

After the usual pleasantries were exchanged, Eric and Chris stepped into the Firefly Group's car. Once they were on their way, Eric recalled the expression John Mack had when he proactively invited Eric into his car, seemingly wanting to discuss something important. He then asked Chris, "What's going on with John?"

Chris glanced at the nearby BMW, stating, "He probably wants to explain something to you. While you were on the plane, I hadn't had a chance to inform you yet. At lunch, Philip Purcell told me that Morgan Stanley had confirmed that 70% of the subscription allocation for that 15% of America Online's stock was already filled. However, in an attempt to take credit -- or possibly for other reasons -- John Mack concealed this information from us. Plus, Philip Purcell probably forced his way into this project; you know, Dean Witter primarily focuses on stock distribution, and their resources and channels outshine those of the old Morgan Stanley."

Eric wasn't particularly interested in the conflict between the CEOs of Morgan Stanley. He simply cautioned, "Make sure you keep a closer eye on this. If their infighting starts to impact our interests, we'll need to be more cautious with future cooperation."

Chris nodded seriously, "I understand. By the way, The Ring's box office is certainly surprising."

The conversation shifted to lighter topics, and Eric chuckled, "That's indeed a surprise. I never expected this horror film to do so well."

*****

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